In recent years, more and more Chinese enterprises have chosen to set up operations in the Philippine Economic Zone Authority (PEZA) to enjoy tax incentives and policy benefits. However, securing incentives is only the beginning. The real key to sustainable growth is ensuring compliance — avoiding disqualification or penalties due to filing lapses.
This article outlines the advantages of PEZA registration, compliance reporting requirements, and penalty mechanisms — providing practical guidance for enterprises operating in the Philippines.
01｜What Are the Advantages of Registering with PEZA?
PEZA, under the Department of Trade and Industry (DTI), is tasked with promoting investment, facilitating business, registering enterprises, granting incentives, and supervising operations inside special economic zones established by Presidential proclamation.
Created under the Special Economic Zone Act (RA 7916, as amended by RA 8748), PEZA regulates zone developers/operators and registered enterprises.
Eligible activities include: export-oriented manufacturing, processing, and assembly, as well as support services such as IT/BPO, tourism, medical tourism, agribusiness, and utilities.
Incentives available to registered enterprises:
1. Fiscal Incentives
Export-oriented: 4–7 years Income Tax Holiday (ITH); thereafter, choice of 10 years 5% Special Corporate Income Tax (SCIT) or Enhanced Deductions (ED)
Domestic-oriented: 4–7 years ITH, followed by 5 years ED
2. Non-Fiscal Incentives
Duty-free importation of equipment and raw materials
Up to 30% of sales allowed for domestic market
VAT zero-rating on local purchases (including power, water, telecom)
Exemption from national and local taxes during SCIT period
Easier employment of foreign nationals
Land lease up to 75 years
PEZA visa (valid for 2 years) for foreign employees and dependents
02｜PEZA Compliance Reporting Requirements
PEZA enterprises must comply with BIR (Bureau of Internal Revenue) filings as well as reporting obligations to PEZA and the SEC.
1. Regular Reporting Obligations
Monthly, quarterly, and annual reports, including production and sales reports, manpower data, and financial statements.
2. CREATE Act Requirements
Under RA 11534 (CREATE) and its IRR, enterprises must submit within 30 days after the annual tax filing deadline:
Annual Tax Incentives Report (ATIR): income tax holidays, VAT exemptions, duty reductions, etc.
Annual Benefits Report (ABR): investment, employment, import/export, profit, and tax contribution data.
3. Other Requirements
Per BIR RMC No. 28-2022, enterprises must apply for a Certificate of Entitlement to Tax Incentives (CETI) within 30 days after annual income tax filing.
Maintain separate books of accounts for ecozone operations.
File tax returns through the BIR’s eFPS electronic system.
03｜PEZA Penalties and Compliance Strategies
PEZA enforces strict compliance. Penalties are tiered:
Late Filing:
1st offense: ₱500 + ₱50/day
2nd offense: ₱1,000 + ₱150/day
3rd offense: ₱2,000 + ₱200/day
Failure to Submit ATIR/ABR:
1st offense: ₱100,000
2nd offense: ₱500,000
3rd offense: cancellation of PEZA registration
👉 The real risk is not fines but loss of PEZA registration, which would mean the immediate loss of all incentives.
Recommended Strategies for Enterprises:
Compliance Calendar: Map out monthly, quarterly, and annual deadlines to prevent lapses.
Bilingual Filing System: Maintain a centralized archive in Chinese and English to ensure consistency across SEC, BIR, and PEZA filings.
Dedicated Compliance Officer: Appoint an in-house compliance lead or engage a local consultant to stay updated with policy changes.
Focus on ABR: Regulators use the ABR to measure an enterprise’s contribution; it directly impacts the continuation of incentives.
Conclusion
For Chinese enterprises in the Philippines, PEZA incentives are a crucial support for investment and expansion. Yet compliance obligations are as complex as the benefits themselves. Timely, accurate, and complete reporting is not only the basis for retaining incentives but also critical for building a reputation of stability and credibility.
OCIC will continue monitoring PEZA policy updates to provide enterprises with the latest compliance insights and practical support. If you are planning or already operating a factory in the Philippines, contact us to receive a customized PEZA compliance calendar and filing checklist — helping your enterprise secure incentives while minimizing compliance risk.
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